Gold Mining Giants Hit Record Profits as Government Policy Shifts Create Multi-Year Bull Cycle

• Major gold miners reported exceptional Q2/25 results with Newmont generating $3 billion in EBITDA and $1.3 billion in free cash flow at an average gold price of $3,320/oz, while Agnico Eagle produced $2 billion in EBITDA and $1.3 billion in free cash flow at superior efficiency margins
• Institutional capital rotation accelerating into gold mining as generalist portfolio managers are forced to buy benchmark constituents, with Agnico Eagle's current EBITDA run rate making it Canada's third-largest company by this metric, surpassing major banks and tech companies
• Government policy shifts supporting mining sector with Australia and the US implementing price floors for critical minerals and defense-critical metals, representing a fundamental change in Western government attitudes toward resource security and strategic metal independence
• Major M&A activity increasing as profitable mining companies deploy record cash flows, highlighted by Royal Gold's $1 billion streaming deal with First Quantum at attractive mid-50% valuation multiples compared to typical 70-90% industry transactions
• Capital waterfall effect beginning where institutional money flows from large-cap producers to smaller developers and explorers as investors seek exposure after missing initial moves in major mining stocks

The mining sector has reached a critical inflection point in Q2/25, driven by sustained high gold prices and fundamental shifts in government policy toward resource security. This analysis of recent industry developments reveals how record profitability at major producers is catalyzing broader institutional investment flows while concurrent policy changes in Australia and the United States signal long-term structural support for the sector. These developments have significant implications for investors seeking exposure to what appears to be a multi-year bull cycle in mining equities.

Record Q2/25 Financial Performance

Newmont Delivers Exceptional Results

Newmont Corporation delivered what may be its best quarter in company history, generating $2.99 billion in EBITDA and $1.3 billion in free cash flow during Q2 2025. With an average realized gold price of $3,320 per ounce, these results translate to approximately $32 million in EBITDA per day and $18 million in daily free cash flow. The transformation reflects Newmont's successful portfolio optimization through strategic asset disposals, allowing the company to focus on higher-grade operations after completing what Derek Mcpherson (Executive Chair) of Olive Resource Capital, described as a "high-grading" of their asset portfolio.

Agnico Eagle Demonstrates Superior Operational Efficiency

Agnico Eagle delivered even more impressive relative performance, generating $2 billion in EBITDA and $1.3 billion in free cash flow while producing approximately half of Newmont's gold output. This efficiency advantage demonstrates Agnico Eagle's ability to extract significantly more value per ounce of production, producing two-thirds of Newmont's EBITDA at just over half the production volume.

The company's performance reflects its consistent approach to portfolio optimization, having built itself through constant asset improvement rather than requiring the major dispositions that other producers have pursued. Agnico Eagle continues to demonstrate this approach through transforming assets like Detour Lake into a spectacular producer and expanding operations at Malartic and Upper Beaver.

AngloGold Ashanti Maintains Strong Growth Profile

AngloGold Ashanti reported $1.4 billion in EBITDA and $535 million in free cash flow for Q2 2025, representing a 150% year-over-year increase in free cash flow generation. The company maintains its position as an attractive investment partly due to what industry analysts consider "probably the most attractive gold growth development project in the world today" in Nevada - a multi-generational asset with significant expansion potential beyond current resource estimates of 14 million ounces.

Institutional Capital Flow Dynamics

Benchmark Performance Forces Generalist Participation

The remarkable profitability of major gold producers has created compelling dynamics for institutional investment. Agnico Eagle's current EBITDA run rate of approximately $8 billion annually would make it the third-largest company in Canada by this metric, trailing only Royal Bank of Canada and TD Bank while surpassing prominent names like Canadian Natural Resources, Constellation Software, CIBC, and Shopify.

This development creates significant challenges for generalist portfolio managers who benchmark against major indices. When a constituent company like Agnico Eagle doubles in value and potentially increases its TSX 60 weighting from 3.5% to 7%, portfolio managers face substantial tracking error risks if they remain underweight. As noted by Derek, 

"That 3.5% is huge when you run a mutual fund that has that type of tight relationship with an index."

Reactive Investment Patterns

The current institutional buying reflects responsive rather than proactive investment strategies. Generalist investors, historically cautious about mining due to sector volatility and execution challenges, initially hesitated despite improving fundamentals. However, benchmark performance requirements are now forcing participation across multiple large-cap gold names including Franco-Nevada and Kinross Gold, creating sustained buying pressure that benefits the broader sector.

Sam Pelaez & Derek Macpherson of Olive Resource Capital

Government Policy Transformation

Australia's Critical Minerals Initiative

Australia has announced plans to establish price floors for critical minerals deemed strategic, representing a fundamental shift in government approach to resource security. This mechanism focuses on minerals with defense and strategic technology applications, particularly those controlled by China, and reflects recognition of the importance of domestic resource security after years of policy neglect.

United States Defense-Critical Metals Strategy

The United States has implemented similar price floor mechanisms for defense-critical metals, exemplified by Department of Defense funding for projects like Mountain Pass. This represents a dramatic policy reversal for projects that previously faced multiple bankruptcies due to Chinese competition and regulatory challenges.

The policy shift acknowledges that Western nations effectively "exported pollution" to China over the past 20-30 years, allowing China to build dominant refining capacity for critical metals. China now controls approximately 66% of global copper flows through Chinese smelters - representing their least controlled major metal - while maintaining near-monopolistic positions in rare earths, tungsten, and antimony.

Strategic M&A & Capital Deployment

Royal Gold's Billion-Dollar Streaming Deal

Royal Gold's $1 billion gold streaming agreement with First Quantum Minerals demonstrates how record industry profitability is facilitating strategic transactions. The deal provides First Quantum with immediate liquidity for potential Cobre Panama restart activities or other investments, while Royal Gold acquires streaming rights at what analysts calculate as mid-50% of in-situ value, compared to typical industry transactions in the 70-90% range.

The transaction covers First Quantum's Kansanshi asset in Zambia, creating additional value for surrounding exploration projects, including positions held by companies like Midnight Sun, which is exploring on the fringes of the Kansanshi deposit and stands in a prime position for potential consolidation.

Acceleration of Industry Consolidation

The transaction environment reflects broader M&A acceleration as profitable mining companies deploy record cash flows for growth. AngloGold Ashanti has completed two significant acquisitions within the past 12 months, while other majors are expected to pursue similar strategies given limited organic growth pipelines beyond AngloGold's Nevada assets.

Macpherson anticipates increased "19.9% and 9.9% type investments" as major producers balance capital deployment constraints with attractive valuations in smaller producers and development projects. The mining companies themselves represent the biggest pool of capital for industry investment, with record profitability providing more capital for sector deployment.

Sector Outlook & Investment Implications

Waterfall Capital Flow Effect

The current market environment demonstrates classic "waterfall effect" dynamics where institutional capital flows from large-cap producers to smaller companies as investors seek exposure after missing initial moves in major stocks. This pattern typically accelerates as large-cap valuations appear stretched relative to smaller producers and developers with similar or superior growth profiles.

Select smaller companies with strong management teams and attractive projects are already benefiting from this dynamic. However, Sam Pelaez (President, CEO, and CIO) of Olive Resource Capital expects this trend to broaden significantly as the cycle progresses, with developers and exploration companies experiencing dramatic revaluations as money continues to "trickle down" the market cap spectrum.

Multi-Year Bull Cycle Characteristics

The combination of sustained high commodity prices, record industry profitability, supportive government policies, and institutional capital rotation suggests a multi-year bull cycle for mining equities. Government support extending from uranium to natural gas and now critical minerals indicates broader political acceptance of mining's strategic value. As Pelaez noted, 

"When the government's finally behind your industry, it's the right moment to invest, it's the right moment to take some risk." 

This policy alignment, combined with record industry cash generation, creates conditions for sustained sector outperformance across multiple metal categories.

Investment Implications

The mining sector has entered a transformative period characterized by record profitability, institutional capital rotation, and unprecedented government policy support. Q2/25 results demonstrate that major producers are generating exceptional cash flows at current commodity prices, creating both immediate shareholder returns and strategic capital for sector consolidation. 

Government policy shifts in Australia and the United States toward resource security represent structural support that extends beyond current commodity price cycles. For investors, these developments suggest a multi-year opportunity in mining equities, with particular upside potential in smaller producers and developers as institutional capital flows broaden beyond large-cap benchmark constituents. 

The convergence of exceptional profitability, policy support, and capital flow dynamics indicates the sector may be experiencing a generational revaluation rather than a typical cyclical upturn, with the political winds finally aligning in favor of an industry that has faced decades of policy headwinds.